If we thought the oil price slide of late 2014 was steep, what about today?
At just over $30 a barrel, Louisiana’s traditional measure of economic vitality is amazing, and not in a good way.
The uncertainty over the impact of the novel coronavirus outbreak almost everywhere should worry swathes of the oil and gas industry that has taken its share of hard knocks already.
A 2014-16 tumble sent prices from more than $100 per barrel to the $30 range before a recovery above $60 coming into this year.
Oil prices fell Monday by the most in one day since the 1991 Gulf War and are the lowest since early 2016.
As so often, global disputes from big producers sparked a market reaction, perhaps an overreaction. Prices had been softer as the expectation of economic slowdowns occasioned by the virus outbreak influenced stocks and energy futures.
The sharpest plunge came as Russia split with the OPEC oil cartel, which sought to limit production to support prices. Saudi Arabia, the leading OPEC producer, then changed course by cutting prices and signaling it will increase production.
We’ve seen this sort of scenario before, because of the international nature of the energy markets. Decisions taken in Riyadh and Moscow can play havoc with Louisiana jobs.
''This is going to undermine global investment sentiment over the next couple of months; the best-case scenario would be a flat line for GDP growth in the U.S.,'' said David Dismukes, head of LSU's Center for Energy Studies.
With luck and the grace of God, the illnesses or deaths from the coronavirus outbreaks will not be so catastrophic.
If and when things return to normal, whatever that is in such a volatile environment as energy markets, the new reality of the 21st century is that America — not least because of Louisiana’s energy workforce — remains one of the world’s largest producers of oil and exportable natural gas.
That’s been good for Louisiana jobs. Further, the state budget outlook is hardly catastrophic even in light of recent events; Louisiana is less dependent on mineral revenues than in the past. At one time, before the oil bust of the 1980s, more than 40% of the state budget was based on mineral revenues; it’s significantly less than half that percentage today.
The world does not run on alternative sources of energy, as much as we support expanding research and development in that realm. Oil and gas will remain the source of energy to fuel the global economy, and prices will rise eventually because of that reality.